Our Bureau The scrip of NBCC (India), which was a darling of the stock market till 2017, hit a rough patch last year. On Friday, the company announced its Q3 results, which analysts termed a mixed bag.

After the sharp fall in the share price, analysts are turning optimistic on the stock for the long term. However, as the blue-chip Government of India Navratna enterprise enters the real estate space, analysts are cautiously optimistic in the short term. Besides, as project clearances take a back seat during election time, analysts fear the company could see slackness in its order book.

The stock posted a negative return of 50.66 per cent in the one-year period, compared to the BSE Sensex’s gain of 4.37 per cent. However, its five-year return at 440 per cent beats the Sensex’s 72.4 per cent hands down.

Analysts say in the medium to long term, the outlook for the company looks promising due to the housing-for-all scheme —Pradhan Mantri Awas Yojana. Whoever forms the government post elections, this initiative, in which affordable housing is proposed to be provided to the urban poor, and which targets building two crore houses by March 31, 2022, would get a further fillip.

The biggest beneficiary of this initiative would be NBCC, they feel.

‘Niche presence’

NBCC has a robust growth story owing to its public works organisation (PWO) status and niche presence in redevelopment of government’s old colonies, said Reliance Securities.

According to Alok Deora of YES Securities, NBCC (India) has delivered a mixed bag performance for the quarter ended December 2018 with a beat on topline and miss on margins.

The company’s order book has remained at elevated levels since several quarters. However, execution has not picked up as expected due to various reasons, he said, and added that with some of the project-level challenges behind it, execution is poised to pick up, which will result in sharp rise in the topline performance.

Buy call

“A debt-free balance sheet and superior return ratios augur well for the company,” said Reliance Securities. “Therefore, we continue to believe that NBCC should trade at a premium to its peers. However, considering the visible de-rating of the industry’s target multiple, we expect NBCC’s premium valuation multiple to de-rate in tandem. Tweaking our target multiple to 20x (from 30x earlier), we maintain our buy recommendation on the stock with a revised SOTP target price of ₹62 (₹90 earlier),” it added.

comment COMMENT NOW